US banks merge to make $930bn giant

Merger fervour gripped Wall Street yesterday as two multi-billion dollar deals were unveiled, including one to create the second-biggest bank in the US.

Bank of America is buying FleetBoston Financial for $47 billion in shares in one of the biggest banking mergers ever, though Bank of America shares fell heavily on fears it was overpaying. Barclays, one-time target of Bank of America, was hurt, its shares falling 10.25p to 495.5p.

Once the deal is completed, Bank of America will sweep past JP Morgan Chase to be the second-biggest bank in America, with assets of $930 billion, just behind Citigroup.

Investors predict that other deals will soon follow. FleetBoston chairman Charles Gifford said: "It is increasingly clear to me there is going to be more consolidation in the banking industry."

Barclays and the highly acquisitive Royal Bank of Scotland are the two UK players thought most likely to strike a headline-grabbing deal with a US partner.

Bank of America is paying $45 a share, more than 40pc above Fleet's closing price on Friday, a premium that suggests the deal is unlikely to face a counter-bid.

For Bank of America, buying FleetBoston completes a coast-to-coast franchise.

Fleet is based in Boston, an area Bank of America had long targeted for expansion. Chairman Kenneth Lewis said the bank is building a "fortress franchise". Mr Lewis becomes chief executive of the combined company, with Mr Gifford chairman.

On a heady day for investment bankers, Anthem is buying WellPoint Health Networks in a $15 billion deal that will create America's largest health insurer.

The announcements sent the Dow Jones up 53 points to 9636 by early afternoon.